Bloomberg news agency announced that Russia is in default for the first time in a century due to its inability to pay off one of its international debts.
The development came after Moscow missed the deadline for a $100 million interest payment.
SANCTIONS MADE PAYMENT IMPOSSIBLE
Russia had the money and willingness to meet its obligation, but sanctions made that payment impossible.
The Kremlin was determined to prevent this development, which had a major blow to the prestige of the country.
The country’s finance minister described the situation as “comedy”.
RUSSIA FINALLY DID NOT PAY ITS DEBT IN 1918
The last time Russia failed to repay an international debt was in 1918. Communist leader Lenin had refused to pay off debts left over from the Russian empire.
In 1998, the country was in default due to domestic debt amid the chaos of the Boris Yeltsin era, but it was able to pay its international debts.
Since the sanctions brought by the USA and the European Union were first announced, Russia was on an inevitable course towards default.
The sanctions limit the country’s access to the international banking system, which allows it to make payments to investors.
Russia has announced that it wants to be able to make all its payments on time, and it has been successful so far.
The first payment date of the defaulted interest payment was 27 May. Russia announced that the money was invested in Euroclear for the purpose of sending it to investors.
But the money got stuck there and didn’t reach the lenders, Bloomberg reported.
RUSSIA WAS IN DEFAULT
As the 30-day payment deadline expired on Sunday night, the debt went into default.
Euroclear did not disclose whether the money was blocked, but said sanctions were being followed.
This development became inevitable after the US Treasury Department did not extend the ‘special exception’ that allows investors to receive payments from Russia.
The Kremlin now seems to have accepted this inevitable situation. With a decree issued as of June 23, it was announced that all future debt payments would be made in rubles from Russian banks, even if the agreements were made in dollars and euros.
“ALL THIS IS A COMEDY”
Speaking to the RIA Novosti agency, Finance Minister Anton Siluanov also confirmed that foreign investors may not receive their money.
“Everyone is aware that there is no such thing as default. All this is a comedy,” said the minister.
Default can happen because a country refuses to pay its debt or because its economy is weak.
Besides the symbolic consequences of default, there will also be daily consequences for Russia.
Countries that are in default have a hard time finding debt. However, Russia’s borrowing from Western markets has already been made impossible by sanctions.
Minister Siluanov said that the country, which is said to obtain one billion dollars a day from fossil fuels, has no plans to borrow new money.